No Fault Insurance New York

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Introduction

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The no-fault insurance law is designed to screen "minor" suits out of the litigative process.

The plaintiff in a personal injury action must plead past the no-fault threshold; i.e., there must have been a serious injury or a loss greater than basic economic loss.

Plaintiff's claim begins to run on the date of the accident.

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Prerequisite to Registration

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Insurance still is compulsory (mandatory) in New York.

The insured must purchase insurance with both the required liability coverage and the required no-fault provisions.

Some parties may choose to be self-insured, meaning that they will either set aside their own funds to meet losses, or they will use their own funds, up to a certain amount, and cover any excess amount with insurance purchased through traditional means.

Self-insurers must comply with the requirements of no-fault coverage.

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No-Fault Coverage: In General

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Together with liability coverage, the Act provides up to 50,000 "first-party benefits" (i.e., no-fault benefits payable to the insured) plus 25,000/50,000/10,000 minimum liability coverage if the insured is sued by a third party in a tort action.

The Act does not provide coverage for property damage, but auto policies by statute must have a minimum of 5,000 liability coverage for property damage.

The Motor Vehicle Accident Indemnification Corporation ("MVAIC") provides no-fault benefits to injured parties who, through no fault of their own, were involved in an accident with motor vehicles that were either uninsured, stolen, unidentified (hit and run), operated without the owner's permission, or unregistered.

An injured party may also recover no-fault benefits through MVAIC if the vehicle in question was registered in a state other than NY, or registered in NY but not covered by a liability policy.

MVAIC insured vehicles where insurer denies coverage/disclaims liability.

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Use or Operation of Vehicle

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The Act covers only the use or operation of a motor vehicle.

It is questionable whether the Act covers entering or leaving, or loading or unloading a vehicle.

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"Covered Persons"

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"Covered persons" include persons injured by the insured owner's vehicle.

These include owner, operator, or occupants of the insured's auto; pedestrians hit by the insured's auto; and any other persons entitled to first-party benefits.

Covered persons also include persons injured by an uninsured motorist and, outside of the state, by an insured motor vehicle (i.e., the named insured and members of her household).

Occupants of a school bus are entitled to first-party benefits under the bus's policy, but only if not covered by another policy providing first-party benefits.

All motorcycle and ATV liability policies must provide no-fault benefits to persons other than occupants of the motorcycle, another motorcycle, or any other motor vehicle for injuries arising out of use or operation of a motorcycle in NY.

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Exclusions from Coverage

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The following persons may be, but are not required to be, excluded from coverage:

1. Persons occupying another motor vehicle or a motorcycle

2. Any person injured:

--a. By his own intentional act;

--b. While operating a motor vehicle in an intoxicated state;

--c. While committing a felony or attempting to avoid a lawful arrest by a law enforcement officer

--d. While operating a motor vehicle in a race or speed test;

--e. While operating or occupying a motor vehicle known by him to be stolen

--f. While operating or occupying his own vehicle for which no-fault coverage is not in effect

--g. While a pedestrian being struck by his own vehicle for which no-fault coverage is not in effect; or

--h. While repairing, servicing, or maintaining a motor vehicle and the injury occurs on business premises

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Geographical Problems

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No-fault coverage extends to the use or operation of an auto anywhere in NY or in any other state.

With respect to a NY auto driven in another state, coverage must be the minimum required by the laws of the other state (or Canadian province).

With respect to nonresidents driving in NY, every insurer transacting business in NY or controlling or controlled by such an insurer must provide minimum liability coverage and minimum first-party benefits (50,000) for any vehicle used or operated in NY.

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First-Party Benefits: No Pain and Suffering

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First-party benefits do not include noneconomic loss, e.g., pain and suffering.

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First-Party Benefits: "Basic Economic Loss" Defined

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Types of "basic economic loss" include medical expenses, lost earnings, and non-income producing expenses.

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"Basic Economic Loss" Defined: Medical Expenses

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The insured party may recover all "necessary" medical expenses, including some forms of nontraditional treatment (e.g., chiropractic treatment, treatment administered in accordance with religious beliefs).

Generally, there is no time limit on recovery of medical expenses as long as it can be determined within one year after the accident that further expenses may be incurred.

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"Basic Economic Loss" Defined: Lost Earnings

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Lost earnings include salaries and wages as well as reasonable and necessary expenses that the injured party may have incurred in lieu of those that she would have performed for income.

Recovery of lost earnings is limited to 2,000 per month for not more than three years from the date of the accident, and would not appear to extend to loss of future earnings by a covered person who is unemployed at the time of the injury.

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"Basic Economic Loss" Defined: Non-Income Producing Expenses

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Non-income producing expenses include costs incurred for such things as household services normally performed by, or needed by, the injured covered person.

Reasonable and necessary expenses are recoverable up to 25 dollars per day for not more than one year from the date of the accident.

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"Basic Economic Loss" Defined: Loss Incurred Because of Death--Limited

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Basic economic loss does not include any loss incurred on account of death, except that the estate of any covered person, other than an occupant of another motor vehicle or a motorcycle, may receive a death benefit of 2,000 for the death of such person arising out of the use or operation of such motor vehicle.

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First-Party Benefits: Deductions

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A covered person can receive a maximum of only 80% of his basic economic loss attributable to lost earnings (i.e., there is a 20% loss of earnings deduction).

A collateral source deduction is allowed only for amounts recoverable on account of such injury such state or federal laws providing Social Security disability benefits or workers' compensation benefits.

There is no deduction for benefits received from Medicare, Medicaid, Blue Cross-Blue Shield, or private accident and health insurance coverage.

There is a family deductible of up to 200 dollars (which applies only to loss of the named insured and members of his household).

A policyholder can elect to have all or some lesser portion of medical benefits covered by his health insurer.

Under such an election, the insurer must reduce automobile rates appropriately.

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Settlement of Claims

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First-party benefits and additional first-party benefits must be paid as the loss is incurred (i.e., periodically).

A claim must be paid within 30 days after the claimant presents proof of the fact and amount of loss.

If a dispute arises, the claimant can either submit the issue to arbitration or bring a contract action against the insurer to recover unpaid proceeds.

If the arbitrator's award is 5,000 or greater, the insurer or claimant can bring a court action de novo.

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Some Tort Actions Still Permitted: "Covered Person" vs. "Covered Person"

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Some circumstances do exist where a tort action may be permitted between covered parties.

In this type of action, the following can be recovered:

1. Property damage claims;

2. Damages for wrongful death

3. Economic loss not included in basic economic loss; and

4. Noneconomic loss (i.e., pain and suffering) IF there is a serious injury.

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"Covered Person" vs. "Noncovered Person": Lawsuit

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A covered person may sue a noncovered person for all damages, including basic economic loss and pain and suffering (even in the absence of serious injury).

However, the insurer has a lien against recovery for all first-party benefits paid or payable by it to a covered person.

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"Covered Person" vs. "Noncovered Person": Settlement

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A covered person may not settle with a noncovered person unless:

1. The covered person has written consent to do so from his insurer

2. The settlement is approved by the court; or

3. The amount of the settlement exceeds 50,000.

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"Covered Person" vs. "Noncovered Person": Subrogation

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An insurer is subrogated to any cause of action not commenced by its insured against a noncovered person within 2 years, to the extent of first-party benefits paid or payable to the insured.

An insurer who pays first-party benefits may not seek reimbursement by subrogation from the tortfeaser except for the statute allows (e.g., against a noncovered person, for serious noneconomic loss, or where a no-fault insurer seeks recover against the tortfeasor's insurer.)

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"Noncovered Person" vs. "Covered" or "Noncovered Person"

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Under case law, a noninsured motorist has a common law cause of action against a negligent party if the injuries suffered were within the statutory definition of serious injuries.

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Effect of Contributory Negligence

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Contributory negligence of plaintiff is NOT a complete bar to recovery in negligence actions since NY has adopted PURE comparative negligence.

Any recovery by the plaintiff will be reduced by his percentage of negligence in the accident.

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Recovery Between Insureds

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Recovery between insureds of two or more covered persons is based on fault concepts.

Settlement between insurers is by arbitration, not by tort actions.

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Interplay Between Worker's Compensation and No-Fault Insurance

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A workers' compensation carrier does not have a lien on the proceeds of a recovery in an action arising out of an auto accident and may not institute an action for such a recovery as assignee of the insured.

A workers' compensation carrier may recover benefits paid to a claimant from the auto insurance carrier of a negligent third party under intercompany loss transfer provisions provided that at least one of the vehicles involved in the accident weighed more than 6,500 pounds or was a motor vehicle used principally for transportation of persons for hire.